Asia Pacific’s Hottest Residential Property Markets In 2018

Property

Asia Pacific’s Hottest Residential Property Markets In 2018

Is 2018 the right time to invest in residential real estate? These four cities in the Asia Pacific region could be a good place for property investors to start.

Published on 4 January 2018

The Asia Pacific region’s residential property markets are poised to continue to their hot streak, and 2018 could be a excellent year for real estate investors in the region. Recent studies by both UBS and Price Waterhouse Cooper show that four cities really stand out in the investment market for the year ahead. Currently in different stages of their market cycles, all offer opportunities at the right price.

Sydney

Hong Kong, Singapore, Sydney, Tokyo, residential property market

The largest city in Australia is in bubble territory, states UBS. The UBS Global Real Estate Bubble Index puts it at 1.80 – anything over 1.50 is considered to be in bubble territory – and they say it has had the greatest average annual price increase at 3.5% since 1980 of all the cities they’ve chosen. This doesn’t necessarily mean the bubble is going to burst anytime soon.

Demand from Asia, especially China, remains strong. According to Credit Suisse, 87% of foreign home buyers in Australia are from China. Credit Suisse also noted that 25% of all home purchases in the state of New South Wales are coming from overseas.

Students from all over the globe still strive to go to school down under and with that comes several good investment opportunities. Demand for student accommodation will drive greater yields, according to Jones Lang Lasalle who put the yield range at 5.50%-6.25%. And on the normal residential front, UBS put the past 12 months of gains at 12%, which is pretty remarkable, to say the least.

The taxes of up to 9.1% of the purchase price of a property being levied on foreign buyers don’t really show any sign of slowing down the market. From an investment standpoint, Sydney pretty much tops the list in all of the key areas Price Waterhouse Cooper rates the city’s residential outlook in their Emerging Trends in Real Estate Asia Pacific 2018 report, and even though prices are high, the outlook, for now, is still mostly positive.

Singapore

Hong Kong, Singapore, Sydney, Tokyo, residential property market

According to the UBS Global Real Estate Bubble Index, Singapore is considered to be fair-valued with a 0.32 rating. Fair-valued is considered anything between -0.5 and 0.5. The city-state’s real estate market has been in many years of decline due to government cooling measures. Prices are still not considered inexpensive by any means. A skilled service worker is expected to need to work for 11 years based on 2017 values to be able to purchase a 650-square-foot home. Compare that to US cities such as Chicago where the timeframe is only three years or Los Angeles with four years and the wealth gap becomes apparent. If a Singaporean wanted to rent out that 650-square-foot property to pay for it, UBS says it will take 33 years.

UBS thinks that Singapore is due for a turn around include a continued decrease in new private home supply and the fact that incomes have increased 4% in the past 10 years. Price Waterhouse Cooper also notes in their Emerging Trends in Real Estate Asia Pacific 2018 that the 50% increase in investment in 2017 and a solid amount of development taking place means that a market bottom is near. If you can afford to purchase a property in Singapore, 2018 could be a great time to get in.

Hong Kong

Hong Kong, Singapore, Sydney, Tokyo, residential property market

Infamous Hong Kong. The gift that keeps giving to property investors is continuing its charge forward – Colliers International is predicting 10% price growth next year. Over the last year, prices have been on a rampage increasing over 20%, according to UBS. The constant growth has put the city firmly in bubble territory on UBS’s chart with a 1.74 rating. That puts its bubble just behind Sydney in the ready to pop stage – although this is not expected to happen anytime soon.

The time it would take for a skilled worker in the Special Administrative Region to be able to purchase their own 650-square-foot apartment is the highest on our list with 20 years needed. Receiving rent to pay for the apartments is at 33 years, the same as Singapore. Interestingly, go back to 2007 and it was a mere 20 years, while Singapore was still very high at 29 years needed.

Tokyo

Hong Kong, Singapore, Sydney, Tokyo, residential property market

The Japanese capital of Tokyo, once the most expensive housing market on the planet, has seen prices rise of late. With that, UBS has placed the city into the overvalued category, although only just. A rating of 0.90 on an overvalued scale of 0.50 – 1.50 is hardly high, but it is nonetheless in the range. At today’s rate, it would take a skilled worker there 11 years afford a 650-square-foot home, according to UBS. That’s significantly higher than the seven years it would take back in 2007. If an investor wanted to rent out a flat to pay for it, they’d be currently looking at a 25-year term.

Over the period of 2012 till today, prices have shot up 25%, a lot of which has been said to be down to Prime Minister Shinzo Abe’s monetary policies which came into play in 2013. UBS believes that the residential market in Tokyo is the top property sector in the city to invest in. Although they note that it’s been very difficult to actually find new projects to invest in, due to a lack of desire to sell land or projects already being built in key areas over the past few years.

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